The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For instance the Universal Technical Institute, Inc. (NYSE:UTI) share price is 268% higher than it was three years ago. That sort of return is as solid as granite. Also pleasing for shareholders was the 57% gain in the last three months.
Because Universal Technical Institute is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Universal Technical Institute actually saw its revenue drop by 3.2% per year over three years. So the share price gain of 54% per year is quite surprising. It's fair to say shareholders are definitely counting on a bright future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We've already covered Universal Technical Institute's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Universal Technical Institute's TSR of 268% for the 3 years exceeded its share price return, because it has paid dividends.
A Different Perspective
We're pleased to report that Universal Technical Institute shareholders have received a total shareholder return of 114% over one year. There's no doubt those recent returns are much better than the TSR loss of 12% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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